Go-to-market (GTM) strategy in Mergers and Acquisitions

Go-to-market (GTM) strategy in mergers and acquisitions

In this blog, we shall discuss on the importance of acquirers evaluating the Target go-to-market strategy (GTM) in mergers and acquisitions to validate if it can help to grow the combined revenues and market share.
Companies having successful go-to-market (GTM) strategy have products that are aligned to the customer needs i.e. there is a Product Market fit.In addition, they have the necessary Sales and Marketing engine to attract the customers to buy their products/services.
Evaluating a Target go-to-market (GTM) strategy is important and at the same time very tedious.An important metric to assess a go-to-market (GTM) strategy is whether the pricing structure, customer base and sales strategy is consistent and aligned to the products/services offered.

Defining Go-to-market strategy in mergers and acquisitions

• A go-to-market (GTM) strategy covers a detailed approach on how to bring a product/services to its target customers so that the product reaches the right customer.This is aligned with the company Business plan and marketing strategy.
• A go-to-market (GTM) strategy starts with a Value proposition followed by a service offering, identifying the target customer segment and how the target customers can be reached.

Define a Value Proposition in mergers and acquisitions

• A value proposition needs to be something which a customer wants to use or the one which if launched would drive customer adoption.
• Hence it is necessary that target firm products/services are aligned to the market demand, have features which the customer needs and also take periodic feedback from their customers on its products/services.

Following important points needs to be analysed to evaluate the effectiveness of the Target go-to-market strategy..

Go-to-market strategy point 1 -What is the Target Selling?

• The target products/services should address a customer pain point and have minimum features that a customer expects when using this product.
• How is the target product different from competitors? Does it have a product which is new in market or does it use a technology that reduce the unit cost or that improves customer experience.

Go-to-market strategy point 2 -Where is the Target Selling?

Another important factor is to arrive at the Total Addressable Market of the Target products/services. An acquirer would prefer that the target products/services is used by a multiple and different customers.

The following important points to evaluate a Target go-to-market (GTM) strategy is

• Is the addressable market big and growing?What is the growth rate?
• What is the average spend per customer for the Target products/services?
• Is the market landscape evolving or be disrupted due to new technology?

Go-to-market strategy point 3 -Who are the Target Customers?

• Once the addressable market of the Target products/services is assessed, then the acquirer needs to validate the target customers base and its customer strategy.
• The customers are segmented based on the need to use a product/service and their behavior.
• Some of the common ways to segment a customer is based on:
  • Geography
  • Customer Budgets
  • Customer size – Revenues
  • Competition
• Post customer segmentation, the acquirer needs to evaluate the decision makers and their designation in the customer organization whom the target interacts with to sell its products/services.

Go-to-market strategy point 4 -How does the Target reach out to its Customers

• An acquirer needs to evaluate how the target reach out to its customers.Does it have a:
  • Direct Sales team
  • Sells its services through Channel Partners
  • Through a website
  • Through affiliates
• Sales & Marketing Budgets –
  • The acquirer needs to evaluate the target sales and marketing budgets.The sales and marketing budgets would depend on the product/service offerings.
  • When target provides a complex SaaS/technology offering for enterprise customers, then its sales people needs to be have technical competency on the product and there would be minimal budgets on social media marketing.
  • If the target is providing consumer internet products, then high budgets are allocated for marketing compared to Sales

Go-to-market strategy point 5 -Target Pricing Structure

The acquirer needs to evaluate how the target prices its products/services to its customers.
The pricing is dependent on:

• Quality of Target product and how differentiated it is with respect to its competitors
• Pricing structure followed by competitors
• Unit costs of Target products/services

If the target offers a service which is premium and does not have high competition, then the target can command high pricing

Conclusion

• Evaluating a Target company’s Go-to-market strategy is vital for acquirers while doing mergers and acquisitions.Primary reason for acquisitions is for acquirer to expand the Total addressable market so that the acquirer can reach out to more customers and gain entry to new markets.
• The acquirer needs to ensure minimal risk in executing the combined GTM strategy with high ease of integration so that it is successful in cross-selling/up-selling the combined target/acquirer services to its customers.